Germany has the potential to be at the forefront of the digital revolution currently under way, but only if it is prepared to make dramatic improvements in its business environment and increase spending on education.

That was the message delivered by Peer Steinbruck, the SPD party’s designated candidate for the role of Germany’s Chancellor in the 2013 general elections, during this morning’s keynote speech at the CeBIT tradeshow in Hannover.

Likening the digital changes happening today to the introduction of steam engines in the nineteenth century, the spread of electricity in the twentieth and the more recent development of mainframe computers, Steinbruck said the world economy was embarking on a “fourth industrial revolution”.

And while US companies like Google (Mountain View, USA), Apple (Cupertino, USA) and Facebook (Menlo Park, USA) are currently spearheading this revolution, the ex-Finance Minister believes that Germany’s industrial strength could allow it to play a leading role.

“We have not made the same mistake of deindustrializing as the UK, where production makes up only 10–12% of the economy,” he told delegates. “In Germany, the figure has been about 25% since 2008.”

Praising Germany’s vibrant SME sector, and the IT powerhouse of SAP (Walldorf, Germany), Steinbruck said that Germany could pioneer the strategic use of IT in industries like healthcare and the automotive sector.

But he criticized the lack of progress on expanding broadband networks into rural areas, as well as regulations that are a deterrent to entrepreneurial activity.

On the former, Steinbruck argued that Germany is falling behind other parts of the EU on the rollout of high-speed, fiber-optic networks – a prerequisite for the digital economy – and called for deregulation to spur investments in this area.

Such rhetoric may be welcomed by Deutsche Telekom (Bonn, Germany), Germany’s telecoms incumbent, which is demanding greater assurances from regulatory authorities before it commits to new broadband deployments.

The operator says take-up of high-speed services is growing fast, but fiber-optic connections formed just 7% of Deutsche Telekom’s total broadband connections at the end of December 2012.

Steinbruck also wants to foster an entrepreneurial climate similar to that in the US, and specifically Silicon Valley, whose companies carry valuations that far exceed those of German IT firms.

“There is no culture of being allowed to fail in Germany, and so those who have failed find it hard to attract funding,” he complained.

Over-regulation is also a problem, he said, forcing companies to ensure their products are “100% developed” before they can be launched in the market.

That is inappropriate in the digital economy, where companies need to be more agile and allowed to test services that are still being developed on user groups in the market, argued Steinbruck.

In a recent World Bank ranking of 186 countries on the ease of starting a new business, Germany came as low as 106, which Steinbruck called “unacceptable”.

The SPD politician also lashed out at Germany’s educational shortcomings. “IT companies cannot fill roles,” he said, because schools and universities were failing in their duties.

According to Steinbruck, a major problem in this area is underfunding, with Germany falling behind other OECD countries in terms of the amount it spends on education.

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